Europe continues struggling and a Greek default seems very close. The crisis will likely step aside at least for a short while, as the focus turns to the Fed. Euro-Zone German ZEW Economic Sentiment, US housing data and the highly anticipated FOMC Statement are the top of our list this week. Here is an outlook on the main market movers lined up ahead.
Last week five major central banks offered to provide dollar liquidity to European banks in fear Greece would not meet its financial obligations to the EU, resulting in an official Greek default. The financial situation in some of the EU countries is worrisome laying a big burden on EU shoulders as well as affecting global markets. Could Greece surprise the world and meet its financial demands?
- Euro-Zone German ZEW Economic Sentiment: Tuesday, 9:00. German investor sentiment dropped more than expected in August sliding to -37.6 from -15.1 in July, well below the forecast of -24.8. The big plunge indicates deterioration in the German market plus fears of further bailouts to neighboring countries. A further drop to -43.2 is expected now.
- US Building Permits: Tuesday, 12:30.U.S. housing starts fell less than forecasted in July reaching 600,000 units with an increase of multifamily units following 601,000 units in June, less than the 610,000 predicted. The housing market is still flooded by an oversupply of existing homes burdening this sector. The same figure of 600,000 is expected for August.
- Canadian Core CPI: Wednesday, 11:00. Canadian inflation: Core CPI increase by 0.2% in July following a decrease of 0.6% in the previous month while CPI also increased by 0.2% in July after dropping 0.7% in June. The major increase was in food housing. CPI is expected to rise by 0.1% while Core CPI is predicted to climb 0.2%.
- US Existing Home Sales: Wednesday, 14:00. Existing home sales unexpectedly declined in July to 4.67M from 4.84M in the previous month amid cancellations of pending contracts. The drop indicates consumers’ lack of confidence in the market and global slowdown. Analysts had expected home sakes to expand to 4.91M. An increase to 4.78M is forecasted.
- US FOMC Statement: Wednesday, 18:15. The statement issued by the FOMC members released on August 9 indicates that economic growth has been slower than anticipated as well as weaker employment data and household spending. However commercial investment in equipment and software has continued to increase. The FOMC members expect a moderate recovery in the following months. The chance of QE3 is low given the relatively high level of inflation. The market currently expects “Operation Twist” – buying of longer dated treasuries in order to lower long term costs. The Fed has a few other options as well.
- NZ GDP: Wednesday, 22:45. The economy of New Zealand expanded in the first quarter of 2011 by 0.8%, better than the 0.3% rise predicted. This increase following a 0.5% rise in the 4th quarter of 2010. The manufacturing sector is the main reason for the rise in GDP.
- US Unemployment Claims: Thursday, 12:30. Jobless claims jumped last week by 11,000 to 428,000, a disappointing figure, the highest in three months indicating bad conditions in the job market. Claims filed in the preceding week reached 417,000. However economists claim companies did not speed up layoffs but hired fewer workers. A drop to 417,000 is predicted now.
*All times are GMT.
That’s it for the major events this week. Stay tuned for coverage on specific currencies